A client’s statement that “we will not continue the project” does not mean that the contractor must simply accept the last progress payment and close the file. Completed work, expenditure rendered wasted by termination and lost profit may each require examination. Conversely, claiming the price of all unperformed work without deducting any expenses is not a proper calculation either.

This article focuses on contracts for work governed by private law. Public construction contracts, construction in return for land shares and contracts involving transfers of immovable property require separate assessment of special conditions. The first question is not “how much compensation?” but the legal reason for termination and the date on which the client ended the contract.

A right to terminate does not eliminate the payment obligation

Article 484 of the Turkish Code of Obligations permits the client to terminate before completion of the work on condition that the client pays for the completed portion and compensates all the contractor’s losses. The ability to end the contract is not a cost-free withdrawal right extinguishing the contractor’s monetary claims.

However, not every termination automatically falls under that article. If delay, non-conforming work or another breach by the contractor is alleged, whether the stated ground exists must be investigated. Article 473 contains separate provisions concerning commencement, delay and non-conformities apparent while work is in progress. Delays by the client in payment, site handover or project decisions may also change the assessment. Turkish Code of Obligations, Articles 473 and 484

The contractor should preserve the full termination notice. “We could not obtain financing”, “the work is no longer needed” and “you failed to follow the programme” do not produce the same legal analysis. Assuming that termination necessarily falls under Article 484 without reviewing the actual notification may lead to errors in the claim and calculation method.

The price of completed work and termination losses must be calculated separately

First, the work actually completed at termination must be identified. The contract’s pricing system, approved progress statements, quantity measurements, handover records and payments should be assembled. The net balance must be shown after deducting advances and partial payments. Any allegation by the client of defects, incomplete work or set-off must also be assessed using documents and technical examination.

Losses attributed to termination are then separated. Depending on the file, preparation expenses incurred solely for this job and unusable elsewhere, payments due under subcontracts cancelled because of termination or irrecoverable order costs may matter. Not every invoice amount automatically represents a loss: if materials can be returned, sold or used on another project, the economic consequences must be calculated accordingly.

The same cost must not be claimed twice, both within the price of completed work and separately as a loss. The claim schedule should explain each item’s basis, payment record, connection with termination and whether it was already covered by earlier progress payments. This allows the expert to investigate the actual economic loss rather than merely add invoices.

Lost profit is not the entire remaining contract price

In its decision of 2 July 2014, E.2013/4839, K.2014/4650, the Fifteenth Civil Chamber of the Court of Cassation examined a construction contract terminated by the client for reasons of need and cost. In that case, the Chamber required the deduction method for calculating expectation loss arising from wrongful termination, instead of the addition method based on Article 369 of the former Code of Obligations, and quashed the judgment. The distinction explained in the decision is that a single calculation method cannot be selected merely from the word “termination”. Full judgment

Under the deduction approach, expenses no longer needing to be incurred, together with benefits obtained from other work during the same period or deliberately forgone, are assessed and deducted from the price of unperformed work. The result is not the gross price of all unperformed work. Earnings from another job must also be distinguished from that job’s entire turnover.

In its decision of 4 February 2025, E.2023/4301, K.2025/317, the Sixth Civil Chamber found the expert’s assessment of deductions inadequate in a school construction project. The majority required a supplementary report assessing saved expenses and earnings obtained from other work or deliberately forgone. The judgment was quashed by a majority; there was a dissent. This does not mean that the contractor was awarded a definitive amount of compensation. Full judgment

Both decisions arose from public construction projects. It is incorrect to transfer the public contract’s termination procedure directly into a private construction dispute. The explanations concerning calculation methods should instead be assessed alongside the legal basis of the particular claim; neither the same profit percentage nor the same total applies automatically to every file.

Preserve evidence before the site changes

The appointment of another contractor, subsequent completion of existing work or demolition may make the state of the project at termination difficult to prove. Dated photographs and videos, site diaries, the work programme, measurements and personnel and machinery records should be preserved promptly. Complete electronic correspondence should be retained with party and date information.

Under Article 400 of the Code of Civil Procedure, preservation of evidence may be requested where legal interest exists because evidence may disappear or become substantially harder to produce. A site inspection and technical expert examination can document completed work and the existing condition. An evidence preservation order is not a final recovery judgment determining the existence and amount of the debt. Code of Civil Procedure, Article 400

The termination notice, contract and annexes, approved changes, extension requests, client instructions and notices should be kept in the same file. Where contractor delay is alleged, a timeline identifying which part arose from the contractor and which from the client is particularly important.

Which procedural route should be chosen?

Depending on the circumstances, the claim seeks recovery of the price of completed work and termination losses. The basis and calculation of the monetary claim must be explained; a statement that “all rights are reserved” does not replace an evidence file. The starting date for interest must also be determined separately from the due date of each item, the contract and the circumstances of default.

A civil court of first instance is relevant where no special jurisdiction rule applies; a commercial court of first instance where the conditions for a commercial action exist. If the transaction is a consumer transaction, the consumer forum and relevant application conditions must be checked. For commercial monetary claims and damages actions, pre-action mediation is required subject to statutory exceptions. In consumer disputes, the consumer arbitration committee’s jurisdiction and mediation exceptions must also be examined. Code of Civil Procedure, Article 2, Turkish Commercial Code, Articles 5 and 5/A, Law No. 6502, Articles 73 and 73/A

Territorial jurisdiction requires assessment of the defendant’s domicile and the place of contractual performance. The location of the construction must not be assumed to be the only competent forum for every monetary claim. The contract should also be checked for arbitration or a valid jurisdiction clause. Code of Civil Procedure, Articles 6 and 10

Deadlines: when the five-year period starts and the effect of mediation

For the contractor’s payment and termination-related claims arising from a contract for work, the five-year limitation period under Article 147 of the Turkish Code of Obligations is generally considered. Under Article 149, it starts when the claim becomes due; not every item should be assumed to become enforceable on the same day. Termination does not automatically reset time already elapsed on progress payments that were previously due.

A notarial demand does not, by itself, interrupt limitation. Grounds under Article 154, such as acknowledgment of debt, litigation and enforcement proceedings, must be assessed separately. In mandatory pre-action mediation, limitation is suspended and time limits extinguishing rights do not run between application to the bureau and preparation of the final record; an expired period does not revive. Limitation must also be distinguished from contractual notification or objection requirements. Turkish Code of Obligations, Articles 147, 149 and 154, Law No. 6325, Article 18/A

A strong contractor file connects the reason for termination, the work completed at termination and the actual economic loss. That connection should be established first; the items sought as payment or damages and the appropriate calculation method can then be determined.

Sources